PNHP

Uwe Reinhardt on rationing in Canada and the U.S.

Does the Ryan Plan Curb Health Spending?

By Uwe E. Reinhardt
The New York Times
April 29, 2011

My post last week, on the budget plan offered by Representative Paul D. Ryan, Republican of Wisconsin and chairman of the House Budget Committee, ended with the observation that the plan did not propose measures to control overall health spending in the United States, “nor does that appear to have been Mr. Ryan’s objective.”

The general idea is that, using whatever financial resources are available to them, patients or their loved ones will, of necessity, engage in a benefit-cost analysis and decide whether the anticipated benefits of end-of-life care exceed its expected cost to the household in terms of what that household has to forgo to buy the extra care. This is how markets work.

Economic theory suggests that, other things being equal, rich and less rich households will come to different conclusions on this question. If less money is available over all to spend on elderly Americans, it is the lower middle class that is likely to do most of the self-rationing.

Note that the Ryan plan proposes a means test to determine the federal contribution to Medicare — the very poor elderly will receive larger federal subsidies, although the size of these subsidies remain unspecified. But the middle and lower-middle class is likely to be on its own.

For reasons that escape me, many Americans do not regard rationing scarce resources through the marketplace, by price and ability to pay, as rationing at all, reserving that term for government withholding of marginally beneficial procedures, based on formal cost-effectiveness analysis.

I do beg to differ.

I have also applied the economist’s reasoning to an analysis of styles of rationing in Canada and in the United States and would be happy to hear what readers make of that. (See link below.)

http://economix.blogs.nytimes.com/2011/04/29/does-the-ryan-plan-curb-health-spending/

Uwe Reinhardt: “Keeping Health Care Afloat – The United States Versus Canada”:
http://www.princeton.edu/~reinhard/pdfs/MILKEN%20REVIEW%20CANADA%20vs%20US.pdf

Readers’ Comments

9. Don McCanne
San Juan Capistrano, CA
April 29th, 2011

Professor Reinhardt’s discussion of rationing in the United States and Canada, available at the “an analysis” link in his article above (the “Keeping Health Care Afloat” link), is an absolute must read for those who really care about how we finance health care.

In a personal communication, Dr. Reinhardt has suggested that we have not been adequately forthcoming about the problems of rationing in Canada, especially the development of queues for non-urgent services. (“We” refers to the fact that I’m senior health policy fellow for Physicians for a National Health Program, an organization supporting single payer reform not unlike Canada’s.)

It is true that we tend to discuss the virtues of single payer while not emphasizing its deficiencies, but the virtues far outweigh the deficiencies and our message would be corrupted by including a disproportionate emphasis on the problems.

That said, we certainly do concede that rationing is an issue, but also we do, in fact, address it. First, we support separate budgeting of capital improvements with an emphasis on getting capacity right to avoid both under-utilization (queues) and over-utilization (the excesses described by John Wennberg and the Dartmouth group). Admittedly, that is always a work in progress, but merely making the effort does result in improvements in capacity.

We also support the science of queue management (how the long lines at airports were reduced after they became intolerable following 9/11). Monitoring capacity and making relatively minor adjustments as needed, along with queue management, has been very effective in avoiding excess queues in many nations.

Canada has been addressing this problem with some success. In fact, if you actually read the reports from the Fraser Institute that demonstrate excessive queues, you will see that in most instances the time intervals are very close to what the specialists believe are reasonable (joint replacement being an exception).

So what actually is the overriding problem of a system like Canada’s? It lies in the ideology of the public stewards of the health care financing system. When egalitarians who believe in government are in charge, efforts are made to attend to problems such as queues and fix them. When those who oppose government programs and prefer private markets are in charge, problems such as queues are allowed to compound for the purpose of driving support for privatization of the health care system (Alberta’s former premier, Ralph Klein, being a prime example).

So, Dr. Reinhardt, I hereby publicly confess that there are potential problems with rationing in a single payer system, but not nearly as severe as the U.S. style of rationing which causes massive suffering and death simply because we ration based on ability to pay. In fact, since all systems ration, selecting rationing that improves value in our health care purchasing might be better labeled as “beneficial rationing.”

Unfortunately, a new report released by the Commonwealth Fund this week shows that, although health insurance will be more affordable because of subsidies under the Affordable Care Act, about one-fourth of middle-income Americans who actually require significant health care will still not be able to pay for it, in spite of subsidies. Rationing by ability to pay was not eliminated by the Affordable Care Act.

Dr. Reindardt, you have also suggested that single payer works better in Canada than it would in the United States simply because Canadians are more egalitarian than we are. But look at the outrage expressed over Paul Ryan’s proposal to privatize our egalitarian Medicare program. Americans can be quite egalitarian when we have something good that works well for all of us.

http://community.nytimes.com/comments/economix.blogs.nytimes.com/2011/04/29/does-the-ryan-plan-curb-health-spending/?permid=9#comment9

Further comment: 

Uwe Reinhardt’s eight page article, “Keeping Health Care Afloat – The United States Versus Canada,” should be downloaded and saved to use as an important resource when responding to expressed concerns about rationing. It is available at the link above.

The most common reason given as to why the United States should reject a Canadian-style single payer system is that it would result in intolerable rationing. Reinhardt’s highly credible article explains in factual terms how rationing works in these two countries. Using Reinhardt’s facts, it is very difficult for me to see how anyone could have an opinion other than it is the United States and not Canada that has intolerable rationing.

Uwe Reinhardt on rationing in Canada and the U.S.

Does the Ryan Plan Curb Health Spending?

By Uwe E. Reinhardt
The New York Times
April 29, 2011

My post last week, on the budget plan offered by Representative Paul D. Ryan, Republican of Wisconsin and chairman of the House Budget Committee, ended with the observation that the plan did not propose measures to control overall health spending in the United States, “nor does that appear to have been Mr. Ryan’s objective.”

The general idea is that, using whatever financial resources are available to them, patients or their loved ones will, of necessity, engage in a benefit-cost analysis and decide whether the anticipated benefits of end-of-life care exceed its expected cost to the household in terms of what that household has to forgo to buy the extra care. This is how markets work.

Economic theory suggests that, other things being equal, rich and less rich households will come to different conclusions on this question. If less money is available over all to spend on elderly Americans, it is the lower middle class that is likely to do most of the self-rationing.

Note that the Ryan plan proposes a means test to determine the federal contribution to Medicare — the very poor elderly will receive larger federal subsidies, although the size of these subsidies remain unspecified. But the middle and lower-middle class is likely to be on its own.

For reasons that escape me, many Americans do not regard rationing scarce resources through the marketplace, by price and ability to pay, as rationing at all, reserving that term for government withholding of marginally beneficial procedures, based on formal cost-effectiveness analysis.

I do beg to differ.

I have also applied the economist’s reasoning to an analysis of styles of rationing in Canada and in the United States and would be happy to hear what readers make of that. (See link below.)

http://economix.blogs.nytimes.com/2011/04/29/does-the-ryan-plan-curb-health-spending/

Uwe Reinhardt: “Keeping Health Care Afloat – The United States Versus Canada”:
http://www.princeton.edu/~reinhard/pdfs/MILKEN%20REVIEW%20CANADA%20vs%20US.pdf

9. Don McCanne
San Juan Capistrano, CA
April 29th, 2011

Professor Reinhardt’s discussion of rationing in the United States and Canada, available at the “an analysis” link in his article above (the “Keeping Health Care Afloat” link), is an absolute must read for those who really care about how we finance health care.

In a personal communication, Dr. Reinhardt has suggested that we have not been adequately forthcoming about the problems of rationing in Canada, especially the development of queues for non-urgent services. (“We” refers to the fact that I’m senior health policy fellow for Physicians for a National Health Program, an organization supporting single payer reform not unlike Canada’s.)

It is true that we tend to discuss the virtues of single payer while not emphasizing its deficiencies, but the virtues far outweigh the deficiencies and our message would be corrupted by including a disproportionate emphasis on the problems.

That said, we certainly do concede that rationing is an issue, but also we do, in fact, address it. First, we support separate budgeting of capital improvements with an emphasis on getting capacity right to avoid both under-utilization (queues) and over-utilization (the excesses described by John Wennberg and the Dartmouth group). Admittedly, that is always a work in progress, but merely making the effort does result in improvements in capacity.

We also support the science of queue management (how the long lines at airports were reduced after they became intolerable following 9/11). Monitoring capacity and making relatively minor adjustments as needed, along with queue management, has been very effective in avoiding excess queues in many nations.

Canada has been addressing this problem with some success. In fact, if you actually read the reports from the Fraser Institute that demonstrate excessive queues, you will see that in most instances the time intervals are very close to what the specialists believe are reasonable (joint replacement being an exception).

So what actually is the overriding problem of a system like Canada’s? It lies in the ideology of the public stewards of the health care financing system. When egalitarians who believe in government are in charge, efforts are made to attend to problems such as queues and fix them. When those who oppose government programs and prefer private markets are in charge, problems such as queues are allowed to compound for the purpose of driving support for privatization of the health care system (Alberta’s former premier, Ralph Klein, being a prime example).

So, Dr. Reinhardt, I hereby publicly confess that there are potential problems with rationing in a single payer system, but not nearly as severe as the U.S. style of rationing which causes massive suffering and death simply because we ration based on ability to pay. In fact, since all systems ration, selecting rationing that improves value in our health care purchasing might be better labeled as “beneficial rationing.”

Unfortunately, a new report released by the Commonwealth Fund this week shows that, although health insurance will be more affordable because of subsidies under the Affordable Care Act, about one-fourth of middle-income Americans who actually require significant health care will still not be able to pay for it, in spite of subsidies. Rationing by ability to pay was not eliminated by the Affordable Care Act.

Dr. Reindardt, you have also suggested that single payer works better in Canada than it would in the United States simply because Canadians are more egalitarian than we are. But look at the outrage expressed over Paul Ryan’s proposal to privatize our egalitarian Medicare program. Americans can be quite egalitarian when we have something good that works well for all of us.

Comment originally published on the New York Times website

Further comment: Uwe Reinhardt’s eight page article, “Keeping Health Care Afloat – The United States Versus Canada,” should be downloaded and saved to use as an important resource when responding to expressed concerns about rationing. It is available at the link above.

The most common reason given as to why the United States should reject a Canadian-style single payer system is that it would result in intolerable rationing. Reinhardt’s highly credible article explains in factual terms how rationing works in these two countries. Using Reinhardt’s facts, it is very difficult for me to see how anyone could have an opinion other than it is the United States and not Canada that has intolerable rationing.